Amazon’s and Google’s stocks could be a 'win-win' even if both companies face government-ordered breakups

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Both companies are expected to keep growing quickly, and if either Amazon or Alphabet is broken up, investors might be sitting pretty.

Today is Google’s 25th birthday. Today is also a day when investors are reacting to a lawsuit by the Federal Trade Commission and 17 states against Amazon.com Inc., accusing the company of “illegally maintaining monopoly power.”Alphabet Inc.’s stock GOOGL, +0.64% GOOG, +0.66% also was up slightly, as its main subsidiary, Google, celebrated its 25th birthday.

On Tuesday, the FTC and states accused Amazon of using “a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.” The behavior has enabled Amazon “to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon,” according to the complaint.

Amazon’s quarterly net sales were up 10.9% from the year-earlier quarter, while AWS saw an 12.2% sales increase. JPMorgan analyst Doug Anmuth wrote in a report on Sept. 8 that many professional investors see the Google trial as a “win-win” for Google.

Amazon always trades at a high forward price/earnings ratio, as the company has never emphasized the bottom line while funding most of its continuing expansion through current cash flow. But on a forward price-to-sales basis, the company trades even lower than the S&P 500 SPX. Amazon is expected to continue growing sales a good clip, and both companies are expected to put up good numbers relative to the sectors and indexes.

 

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